Health insurers in some markets could have a special, local kind of problem with one of three new “three R’s” risk-management programs: the risk-adjustment program.
Before an insurer in a market can collect the risk-adjustment program cash transfers it’s expecting to receive for the 2014 benefit year, the insurers in the market that owe the payables have to pay their risk-adjustment program bills.
Officials at the Center for Consumer Information and Insurance Oversight (CCIIO), the division of the Centers for Medicare & Medicaid Services (CMS) in charge of the risk-adjustment program, acknowledge in a memo to insurers that, “in rare circumstances,” CMS could have trouble collecting payments from health insurers that owe payables for 2014.
“CMS will use all appropriate debt collection processes available to the federal government to enforce the collection of risk-adjustment charges,” officials say in the memo, which is posted on the semiprivate Regtap website.
If CMS is unable to get an insurer to make full payment for 2014 risk-adjustment charges on time, “2014 benefit-year risk-adjustment payments for that risk pool will be adjusted on a pro-rata basis to reflect the undercollection,” officials say. “Risk-adjustment charge for other issuers in the risk pool would not be affected.”
An issuer can reflect the reduced risk-adjustment payment in the risk corridors and medical loss ratio (MLR) report filed in the following year, officials say.
PPACA drafters created the permanent risk-adjustment program, along with a temporary reinsurance program and a temporary risk corridors program, in an effort to keep PPACA underwriting and benefits design changes from drowning insurers.
The reinsurance program is using a broad-based health insurance industry fee to pay expenses incurred by holders of fully PPACA-compliant individual coverage with very high medical bills in 2014, 2015 and 2016. CMS has said that program has collected enough fee revenue to pay more benefits for eligible 2014 claims than managers originally promised.
The risk corridors program is supposed to use cash from exchange plan issuers that did well in 2014, or will do well in 2015 and 2016, to help issuers that end up with weak operating margins for those years. CMS has not said how the cash it might get from thriving insurers will compare with the amount of cash it thinks it needs to help the struggling insurers. The agency recently said it has concerns about insurers’ risk corridors and MLR filings for 2014 and is taking extra time to validate the data in the filings.
The risk-adjustment is supposed to use cash from insurers with enrollees with relatively low risk scores to compensate insurers with enrollees with relatively high risk scores. CMS published preliminary risk-adjustment payables and receivables estimates in June.
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The three R’s were supposed to help increase competition in the health insurance market and hold down rates, by giving insurers the confidence to accept narrow anticipated profit margins when setting premiums.
Some insurers have said the lag between the time they originally thought they would get the three R’s payments and the time when it seems as if the payments might actually arrive has caused cash-flow problems.